State Taxation of Nonresident Income and the Location of Work

David R. Agrawal, Kenneth Tester

Research output: Contribution to journalArticlepeer-review


Prior studies show that taxes matter for the residential locations of high-income earners. But states raise a significant share of revenue from nonresidents. Using variation in state tax rates, we provide causal evidence on the effect of the net-of-tax rate on the location of labor supply for professional golfers. State taxes induce high-income earners to shift employment to low-tax states without a residence change. The elasticity of working in a state is 0.34 and, consistent with the superstar phenomenon, increases with earnings. Our results suggest a novel margin of mobility responses for top earners: the spatial relocation of labor supply by nonresidents.

Original languageEnglish
Pages (from-to)447-481
Number of pages35
JournalAmerican Economic Journal: Economic Policy
Issue number1
StatePublished - 2024

Bibliographical note

Publisher Copyright:
© 2024, American Economic Association. All rights reserved.

ASJC Scopus subject areas

  • General Economics, Econometrics and Finance


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